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In Sprint, T-Mobile Merger Talks, Power Shifts to a Familiar Agitator -- Update

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06/14/2019 | 05:12pm EDT

By Drew FitzGerald and Brent Kendall

As executives from T-Mobile US Inc. and Sprint Corp. work to save their more than $26 billion merger, a familiar agitator is looming ever larger over negotiations with the U.S. government.

Charlie Ergen, the billionaire executive chairman of Dish Network Corp., has been trying to persuade antitrust enforcers the deal is bad for competition. Now he is arguing the best way to remedy that is to force the wireless companies to cast off more assets, and his satellite-TV operator is leading the chase to acquire them, people familiar with the matter said.

Mr. Ergen met jointly with Federal Communications Commission Chairman Ajit Pai and Justice Department antitrust chief Makan Delrahim this week and "explained the need for a minimum of four nationwide mobile network operators," according to an FCC filing posted Friday.

The deal earned the FCC chairman's blessing last month after the merger partners agreed to divest of Sprint's Boost Mobile prepaid brand and to invest in rural broadband. But the Justice Department is still pushing the companies to shed more assets, such as wireless spectrum licenses, and make other commitments that would preserve competition in the cellular market, according to people familiar with the talks.

Dish, which has amassed vast amounts of wireless spectrum that it needs to put to use, is among the companies in the running to become the fourth operator, people familiar with the matter said. Other suitors include cable operators Charter Communications Inc. and Altice USA Inc., the people said.

Mr. Ergen spent the better part of a decade in pursuit of other telecom companies, joining talks to acquire MetroPCS, Clearwire and DirecTV, among other firms. Those companies ultimately rejected his overtures and joined T-Mobile, Sprint and AT&T Inc., respectively.

In 2013, he sought to buy Sprint. In 2015, he tried to buy T-Mobile. Last year, he went after Sprint again.

The missed connections have given Mr. Ergen the reputation of someone who "snatches defeat from the jaws of victory," New Street Research analyst Jonathan Chaplin said.

"He's screwed it up for himself in the past by overplaying his hand," Mr. Chaplin said, though he described Mr. Ergen as "exceptionally bright and perfectly capable of extracting a good deal for himself."

Sprint opted last year to instead join T-Mobile in an all-stock deal that would leave the U.S. with three nationwide cellphone carriers instead of four. The deal seeks economies of scale in a mature U.S. wireless market dominated by Verizon Communications Inc. and AT&T. Previous efforts, however, have been derailed by antitrust concerns.

Mr. Ergen has long threatened to spoil the wireless deal. The billionaire was among the deal's early opponents and has funded a group of lawyers and economists who argue the transaction would harm competition.

Dish doesn't offer cellphone service and doesn't directly compete with either wireless carrier. The company is building a bare-bones 5G network using spectrum it has amassed at auctions over the past decade.

Its core business selling satellite-TV services has suffered as customers defect. It lost nearly 1 million subscribers last year, putting pressure on the business to diversify. Bundling cellphone and satellite services could help Dish compete with cable providers that can already sell broadband services.

The Englewood, Colo., company is wiring its cellular network first for the Internet of Things market that includes vehicles, sensors and other connected devices. The company hasn't identified any major business customers for the network. It plans to later upgrade that skeleton network through a second construction phase to address a broader customer base in later years.

That strategy has put Dish in the crosshairs of FCC officials, who are concerned that Mr. Ergen is squatting on valuable airwaves. The agency last year warned the company that it could take away some of its licenses unless it can credibly demonstrate it expects to use them to serve customers.

Handing Dish a cellphone business could solve problems for several parties. T-Mobile and Sprint would have all the federal approvals they need to close their merger, a powerful weapon in pending litigation against a group of Democratic state attorneys general. The state officials broke with the Justice Department this week and filed a lawsuit seeking to block the tie-up, arguing it would raise prices and reduce innovation.

The divestiture would also let Mr. Ergen run a cellphone business that satisfies FCC regulations. He has acknowledged that his company doesn't have the capital it needs to finish its full network.

"But that capital could come in many shapes and forms," Mr. Ergen said last year during a conference call. "And like anything else, when you have a really good business plan, you can find partnerships and or capital to make those things happen."

Sarah Krouse contributed to this article.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Brent Kendall at brent.kendall@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
DISH NETWORK CORPORATION -0.71% 37.51 Delayed Quote.50.22%
SPRINT CORP -3.95% 6.56 Delayed Quote.12.71%
T-MOBILE US -2.06% 73.04 Delayed Quote.14.82%
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EBIT 2020 2 488 M
Net income 2020 -558 M
Debt 2020 34 473 M
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P/E ratio 2021
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EV / Sales 2021 1,93x
Capitalization 27 862 M
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